We are removing the 40 year old tile from our bathroom walls - it is
doing fairly significant damage to the drywall underneath, in fact
there are a few small spots where it has torn all the way through to
the stud area. We are planning on covering the same area that was
tiled with wainscotting and trim, and caulking very well around all
seams to keep out moisture. Other than perhaps patching the few areas
where the drywall has gone all the way through, is there any reason we
would have to replace the entire drywall since we will be recovering
it anyway?

Thanks in advance for any advice!